Mechanical and plant engineering companies in Germany exported 4.6% less in nominal terms in the first quarter of 2024 than in the previous year, according to the industry association VDMA, based on preliminary calculations by the Federal Statistical Office. Adjusted for prices, the result was even 7.0% below the previous year's figure. The significant slowdown in exports that was already evident last year thus continued. A total of 50 billion euros worth of machinery and equipment was exported from Germany to countries all over the world.

Above-average decline in deliveries to the EU

© VDMA/shutterstock.com

At a nominal 7.1%, the decline in exports to the partner countries of the European Union in the first quarter was greater than to the rest of the world. An incipient recovery in the EU is all the more significant as the EU partner countries are by far the most important sales market, accounting for 44% of total German machinery exports, according to the VDMA. Benedict Jeske, VDMA economic expert: "After a phase of stagnation in the second half of 2023, the EU economy is now on a moderate recovery path. Private consumption is likely to be the driving force behind this recovery. However, the capital goods industry in general and mechanical and plant engineering in particular, as late-cycle industries, will usually only benefit from the improved sentiment and capacity utilization of their customers in the EU after a delay of several months."

The development of the five most important sales markets within the EU is as follows In nominal terms, 3.0% fewer machines were exported to France in the first quarter of 2024 than in the previous year. Deliveries to Italy and Austria even recorded double-digit nominal declines of 14.7% and 12.2% respectively. Machinery exports to the Netherlands were down 5.1% on the previous year. Germany delivered 3.9% fewer machines to Poland.

Demand from the USA weakens

Demand from the USA, the largest single market for German machinery exporters, had already weakened by the end of last year. However, companies still recorded double-digit nominal growth of 12.6% for 2023 as a whole. In the first quarter of 2024, growth only reached a small nominal increase of 2.1%. "The US economy had exceeded its pre-pandemic growth trend, but the US economy has recently slowed down. Although inflation remains stubborn after the initial successes of interest rate policy, inflation is likely to slow so much in the second half of the year that the way will be clear for at least a reduction in the US key interest rate later in the year and the prospects of a 'soft landing' for the US economy will increase," says Jeske, assessing the situation.

Some large emerging markets such as Mexico, on the other hand, are developing well. "In some cases, they are even benefiting from the reorganization of global supply chains and increasing trade tensions between China and the USA," adds the VDMA economic expert. Machinery exports from Germany to Mexico rose by a nominal 22.9% in the first quarter, having already increased significantly in the previous year. This makes Mexico by far the fastest-growing country among the 20 most important sales markets for German machinery exporters.

Subdued demand from China, but signs of an upturn

Machinery exporters' business in China remains weak. In the first quarter of 2024, machinery exports from Germany were down 2.1% in nominal terms on the previous year's result, which was already not too high. "The Chinese economy continues to suffer from the downturn in the real estate sector and domestic demand also remains subdued, as our latest economic survey of VDMA members in China shows. Continued weak domestic demand could further exacerbate trade tensions in an already tense geopolitical environment. This is not in the interests of our export-oriented industry," warns Jeske.

According to the latest VDMA business climate survey, in which 220 subsidiaries of VDMA member companies in China took part, 12% of participants rated the current business situation as good and 48% as at least satisfactory. In contrast, 40 percent consider the situation to be poor. These assessments result in a still strongly negative overall rating of minus 28 percentage points. However, compared to the survey in fall 2023, when the index was still at minus 33 percentage points, this indicates a slight recovery. This is also reflected in the fact that 40% of companies expect their business situation to improve in the coming months. Only 10% fear a deterioration; in fall 2023, this figure was twice as high (20%).

Growth remains below expectations

57% of German mechanical engineering companies expect growth in 2024, while 31% anticipate a decline. VDMA member companies are forecasting average growth of 4% for 2024. "This is a modest result and is below the Chinese government's target for this year," explains Claudia Barkowsky, Managing Director of the VDMA in China, adding: "In 2023, we also lagged behind China's GDP growth, which reached 5.2%, while the Chinese mechanical engineering industry as a whole grew by 1.9%. Our companies in China recorded zero growth last year." There is currently a lack of new investment in the automotive and electronic consumer goods sectors, among others. "These industries had invested heavily in industrial robotics and automation technologies, especially during the pandemic years, which should now be utilized to capacity. Local suppliers in this sector are currently showing better growth figures than the member companies we surveyed," adds Daniel Yoo, Office Manager VDMA Shanghai.